Selling a Business - why confidentiality counts

Selling a business is a confidential process - you do not want anyone to know your business is for sale. Here’s why:

Employees will have questions you can’t fully answer. Insecure about their future, they may look elsewhere for a job. Losing key employees could affect the sale of your business.

Customers might go elsewhere, reducing sales and profit, making your business less attractive to a buyer. Thinking you’re having financial difficulties, suppliers may take steps to protect themselves, demanding cash rather than credit and transferring your exclusive agreement to a competitor.

Competitors may take advantage of what can be a period of uncertainty to chip at your business base.

Business brokers have established systems to protect the confidentiality of a business. A broker with a well-established firm can expose the opportunity to hundreds of prospective buyers without employees, customers or a competitor knowing the business is for sale. Advertising won’t specifically identify the business.

A broker will also screen prospects to confirm their resources and potential for assuming your business, so you don’t waste time with tire-kickers. A more detailed business prospectus is only provided to qualified prospective buyers after a strict and detailed, legally enforceable non-disclosure agreement (NDA) has been signed. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets. It also prohibits the potential buyer from letting anyone know you are selling.

Meetings are facilitated between the business owner and buyers that are serious. Then, if the seller agrees, the buyer is given proprietary financial and operating information, including strengths, weaknesses, opportunities and threats facing the business, to make an informed decision about proceeding with an offer.

When should a seller tell their employees? When the deal is done! It’s the same for key customers. You’ll want to introduce the buyer and give both staff and clients confidence about the changes to the business after closing the deal.